An interesting question came to me from a student who is working on a thesis where he compares affiliate marketing to (direct) social media marketing. He wrote:
I am trying to find what will be the average cost of recruiting an affiliate (general) and what are the costs for keeping him in the program (such as affiliate manager, systems, sites, products…).
It’s a great question, and
just like him I have not seen any research on the topic. So I’ve decided to sit down and write up my thoughts on these “costs” (publishing them, with the student’s consent, in this blog post).
Cost of Recruiting New Affiliates
The “cost” of recruiting a new affiliate will vary depending on three factors: (i) the niche in which the merchant is operating (its popularity, saturation, etc), (ii) the attractiveness of the affiliate program (its competitiveness and prospect), and (iii) the type of the affiliate (e.g. many coupon affiliates will join themselves, whereas truly powerful/influencing content producers will take additional time and effort to recruit).
Of course, you could derive the “cost” of recruiting a new affiliate from the affiliate recruitment tools and options available out there. Here are just a few examples:
- Tools like Linkdex and AffiliateRecruitment.com don’t display prices now, but from this post we know that the latter used to charge “from $99 for a list of 25 affiliates to $250 for 500.” Hence the range is $0.50 t0 $3.96 per prospective (not recruited) affiliate
- ShareASale’s tools the most effective of which for us has been the Holiday Center, where the price for 1 ad (currently) ranges from $75 to $100. We were able to recruit over 200 per campaign, which = under $0.50/affiliate
- CommissionJunction’s “Affiliate Recruitment” tool or AvantLink’s “Affiliate Recruitment” tool = $0/affiliate
You may go another route, and divide what you pay your affiliate program manager by the number of affiliates they recruit. But since affiliate recruitment is just one of the many affiliate manager’s responsibilities, this approach will require some dividing (perhaps, tied to the percentage of time spent on recruitment). Some agencies, however, even offer a service where they “identify 100 affiliate partner prospects” to approach. At the time of this post such a “campaign” costs $450/mo, and ” results in 8 to 20 prospects accepting the invitation to join your program,” resulting the range of $56.25 to $22.50/affiliate.
Finally, you may also analyze what different affiliate programs pay as a bounty for affiliates to refer other affiliate sign-ups.
As it is quite obvious, none of the above methods will give you a firm average, but just a range. It may be easier to arrive at a cost per specific type of affiliate (based on the cost of tools that will be required for recruiting them), but I’ll leave that up to you to calculate.
Cost of Retaining Affiliates
The original question used the wording “keeping” them “in the program” and presupposed that it would be achieved via “affiliate manager, systems, sites, products” and so on. This is only partially true.
In reality, “retaining” an affiliate is easy, but retention itself doesn’t help you a bit unless the affiliate is active. We know that in many programs the affiliate activation index (i.e. the percentage of affiliates active in the program) ranges from 5% to 10%, while in programs where the affiliate manager is devoting time to affiliate activation the index rises up to 20% or higher.
So… We should really be focusing on the cost of activating here.
My experience shows that when you are actively recruiting — embedding a call to and an incentive for activation into your recruitment efforts — one (recruitment) naturally flows into the other (activation). In cases with inactive affiliates who have joined your program by themselves (via an affiliate directory or a listing on an affiliate network), it often takes as much effort to active them as to recruit a new one.
A couple of years ago, when looking at the value of an existing customer, Flowdown concluded that the cost of acquiring a new customer is 6-7 times higher than keeping an existing one. In case with affiliates, it is at least that high (or more likely even higher). But again, the numbers will be yours to crunch, and will likely differ significantly depending on the vertical, affiliate type, tools and techniques employed for the purpose of signing them up, and then ensuring they start promoting you, and keep promoting you.
I’d love to hear other affiliate manager’s thoughts on the subject. As always, the “Comments” area under this post is wide open for your input.